Uber CEO Admits Company Can Afford Labor Protections for Drivers

Uber CEO Dara Khosrowshahi reassured investors concerned about new European Union regulations in December, telling a group of bankers that his company can continue to thrive even under rules that would force it to hire drivers as employees.

“We can make any model work,” Khosrowshahi said when asked about potential EU legislation that would require Uber to designate drivers as employees or provide additional rights such as vacation time and a pension.

Speaking by video at a December 14 “fireside chat” hosted by the Swiss bank UBS, Khosrowshahi told investors that recent decisions in Spain and the United Kingdom have not drastically harmed the company. In the past year, both countries have enacted rules compelling gig companies to provide more worker protections to drivers.

“Spain business is up close to 40 percent on a year-on-year basis, and Spain EBITDA margins are very close to our overall long-term margins as well,” noted Khosrowshahi, referencing the company’s cash flow before taxes and interest.

“There’s a lot of demand for our technology, our service, our brand, our safety, our reliability. So any model can work economically for us,” he added.

The Uber CEO’s nonchalant remarks appear to contradict the company’s stance in the United States.

The classification of gig economy drivers has become one of the most contentious modern labor industry issues in the U.S., where an estimated 59 million total gig workers labor without benefits, guaranteed hours, or the protection of a union. Uber has been a leading force in preserving this gig structure, pouring over $190 million into a ballot measure in California alone to reverse rules that granted most drivers employee status. The regulations, passed by the California State Assembly in 2019 as Assembly Bill 5, or A.B. 5, aimed to make these workers eligible for minimum wage, union membership, and health care benefits.

In 2020, as gig companies fought the law in California courts, Khosrowshahi floated the possibility of temporarily suspending services in the entire state. The law has now been partially repealed, keeping the ride-hailing and delivery drivers it was designed to convert classified as independent contractors.

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Uber has preserved its focus on maintaining this classification in every market in which it operates. The company is currently spending millions of dollars on advocacy to enshrine independent contractor status laws for drivers in Illinois, Massachusetts, New York, and other states that have considered gig labor reform.

Employer costs for employee benefits tend to be higher in the U.S. than in Europe, given the U.S. system of employer-provided health coverage. In many European states, the government provides health benefits and directly limits health care costs.

But the political environment is different across the Atlantic in many other ways. Despite a string of lobbying victories in the U.S. around the driver classification issue, the tides have recently turned in Europe, where the courts and elected officials are more aligned with labor interests.

Last August, Spain enacted the “Rider Law,” which requires gig food delivery companies to classify drivers as employees. Uber lashed out in response, claiming that such rules “directly hurt thousands of couriers who use food delivery apps for much-needed flexible earnings opportunities and made it clear they do not want to be classified as employees.”

Like in the U.S., independent contractors in Spain are not afforded a number of employer-provided benefits, such as paid leave, and are excluded from joining unions or collective bargaining agreements. Under the new law, Just Eat, Europe’s largest gig economy food delivery platform, signed a contract with Spanish unions CCOO and UGT for a higher hourly rate, extended vacation, a maximum working day of nine hours, and other protections. Uber Eats, however, responded by hiring a fleet of drivers through third-party employment agencies, an arrangement that helps the California-based firm avoid direct management of its drivers while complying with the Spanish labor law.

In the U.K., courts ruled last year that Uber must classify 70,000 drivers as “workers.” The worker classification, a technical distinction from either an independent contractor or employee under British labor law, allows drivers to receive a minimum wage, vacation time, and access to a pension plan.

In the wake of the U.K. decision, Khosrowshahi published an opinion column pledging to respect the ruling and treat drivers as workers. “Following last month’s UK Supreme Court ruling, we could have continued to dispute drivers’ rights to any of these protections in court. Instead, we have decided to turn the page. Beginning today, Uber drivers in the UK will be treated as workers,”  Khosrowshahi wrote.

By revealing Uber’s continued business success in Spain despite the enhanced worker protections, last month’s investor call belies the company’s advocacy.

The series of defeats for Uber’s management could roll into a much larger setback, as the EU is now considering federation-wide adoption of Spain’s gig economy law. The European Trade Union Confederation said that the EU “must” follow Spain’s lead and adopt a similar law, a push that is growing in the European Parliament.

While conceding defeat in the U.K., Uber has continued to oppose Spain’s Rider Law and has employed lobbyists in Brussels to prevent a similar statute from being enacted across the EU. By revealing Uber’s continued business success in Spain despite the enhanced worker protections, last month’s investor call belies the company’s advocacy.

Asked for comment about Khosrowshahi’s apparent reversal, Uber emphasized its focus on treating drivers as independent contractors.

“Poll after poll shows that drivers overwhelmingly want to remain independent contractors and work where and when they want — but they also deserve more protections,” wrote Uber spokesperson Noah Edwardsen in an email to The Intercept.

“In Europe, Accenture, Good Work, Oxford Economics and the latest studies from Copenhagen Economics (based on a survey of 16k European couriers) as well as Compass Lexecon make it clear the #1 reason people access platform work is for flexibility to earn money while balancing other commitments, and would prefer to remain independent. This is why we believe the best answer is to provide new benefits, while ensuring drivers and couriers keep the flexibility they value,” Edwardsen continued.

But labor advocates see a company that is merely forced to comply with the rules and will stop at nothing to maximize profit for executives and shareholders.

“Uber has always said it couldn’t adapt to an employee model that afforded its drivers fundamental protections in law like a minimum wage and the right to form a union,” wrote Steve Smith, a spokesperson for the California Labor Federation, in a statement to The Intercept.

“Dara Khosrowshahi’s acknowledgement that the company can — and has — adapted to treating workers as employees in other countries is a slap in the face to every single driver in the US that Uber continues to exploit,” Smith added. “It boils down to pure greed of wealthy executives who will do anything in their power to lock workers out of having a share of the profits their labor creates.”